Facilitating a solid economic recovery with a focus on substantially expanding domestic demand and boosting market confidence will be key priorities for China next year, after a key meeting outlined major policy objectives and plans for the overall improvement of the world's second-largest economy.
The tone-setting Central Economic Work Conference, which concluded on Friday, sent a strong message that reviving the COVID-19-hit economy and bringing GDP growth back to a reasonable range will be a major task of the government, officials and economists said over the weekend.
Further optimization of pandemic containment measures and better policy coordination will support a strong economic rebound in the first half of next year, they added.
China's top leadership has showed a clear intention to normalize the country's economic activity and minimize the impact of the pandemic on people's lives by prioritizing the stabilization of growth, employment and inflation, they said.
The country will see a notable economic rebound next year amid a sluggish global economy, while the resumption of life and production order will accelerate in the first half of 2023, said Han Wenxiu, an official with the Central Committee for Financial and Economic Affairs.
"China's economy is still highly resilient and has great potential and vitality, and the economic fundamentals that will sustain long-term growth remain unchanged," Han said on Saturday at a conference held by the China Center for International Economic Exchanges.
Some economists have upgraded their projections for China's growth next year and said it is possible for the country to achieve a substantial improvement in its GDP growth rate in 2023, given the strong policies to revive the economy, intensified policy support and a low comparison base this year.
While the economy will likely continue to face strong headwinds and disruptions caused by ongoing COVID-19 outbreaks, economic recovery is expected to accelerate in the second quarter of next year if the ongoing COVID-19 wave peaks in the first quarter.
Analysts said that recovery in consumption will be a main growth driver in 2023 as the top leadership has pledged to revive consumption and spur domestic demand, especially in property upgrading, electric vehicles and elderly-care services.
"We think the government may extend some supportive measures for consumption in 2023, enhance support for employment, especially among young people and college graduates, and boost household income growth. After the COVID wave likely peaks in the first quarter of next year, we expect household consumption to rebound notably," said Wang Tao, head of Asia economics at UBS Investment Bank.
While consumer sentiment and confidence may continue to remain cautious in the short term, Zhou Maohua, a macroeconomic analyst at China Everbright Bank, said the optimization of COVID-19 containment measures will give a strong boost to the recovery of domestic demand next year. He said he expected to see a gradual normalization of activities and accelerated resumption of work and production in business and services such as catering, tourism and retail.
A substantial rebound of consumption in China's private sector will also spur a notable recovery of China's imports of consumer goods, raw materials and resources, thus benefiting China's major trading partners, Shan Hui, chief China economist at US investment bank Goldman Sachs, said in a research note.
Meanwhile, a stable recovery of the property sector also holds the key for the overall improvement of China's economy, as the top policymakers at the Central Economic Work Conference called for support for the sector by fulfilling developers' reasonable financing demand, effectively mitigating risks related to top developers and improving their balance sheets, economists said.
Han, the senior economic official, said that preventing and resolving risks in the property market is one of the government's top priorities, as the property sector accounts for about 7 percent of China's GDP while revenue from land sales and property-related taxes account for nearly half of local governments' fiscal income.
Vice-Premier Liu He said last week that China is mulling new measures to improve the property sector's asset and liability condition in order to better guide market expectations and boost confidence.
"It is crucial for the supportive policies to effectively spur demand in the housing market including people's demand for property upgrading, which in turn could help improve the cash flow of property companies," said Li Qilin, chief economist at Shanghai-listed Hongta Securities.
Looking ahead to next year, China's macroeconomic policy will likely adopt a pro-growth stance by expanding fiscal spending and providing greater monetary support to the economy. Top policymakers have emphasized that proactive fiscal policy measures need to be reinforced to improve efficiency, and prudent monetary policy measures need to be precise and forceful.
Luo Zhiheng, chief economist at Yuekai Securities, said that the policymakers have pledged to maintain the necessary intensity of fiscal spending, meaning that the government will maintain a relatively large-scale budget deficit and a certain volume of special bonds by local governments in order to support growth.
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